Dearth of first-time buyers holds back housing rebound in US
Despite favourable interest rates, difficulty in obtaining financing deters purchases
The chief executive of a real estate brokerage business owned by Warren Buffett's Berkshire Hathaway said the housing market in the United States is more than halfway through its recovery, held back by a paucity of buyers able to obtain financing for their first homes.
Ron Peltier, chief executive of HomeServices of America, said "our industry is probably in the sixth inning of a nine-inning recovery", with very strong activity in coastal markets such as Miami, Boston and New York, and in the market for higher-end homes across the country.
"The single most challenged sector of the market is the first-time homebuyer," he said. "Historically, they make up 40 per cent of the existing home market. In the past 18 months to two years, it has been 27 to 28 per cent. Twelve per cent of the market has been missing. It's troubling."
Home resales in March hit a 1½-year low, dropping to an annual rate of 4.59 million units, according to the National Association of Realtors.
Meanwhile, the Department of Commerce said sales of new single-family homes fell to an eight-month low, at a seasonally adjusted annual rate of 384,000 units.
Bad weather was a factor in both declines. But Peltier said many prospective homebuyers were facing hurdles that became more commonplace after the country's housing slump.
"There are still very, very favourable [interest] rates," he said. "[But] credit standards and down payments are excruciatingly difficult. There's a will to buy, not a way to buy."
In the first quarter, Berkshire reported a US$24 million pre-tax loss from "real estate brokerage and other" items within Berkshire Hathaway Energy as spending rose on employment and marketing. Revenue grew 21 per cent to US$405 million.
Some of that extra marketing was to rebrand local brokerages as Berkshire Hathaway HomeServices. That puts Buffett's Berkshire name on "For Sale" signs, and Peltier said it was helping business.
"The brand is golden," he said. "We have received an incredible number of comments from every market we've launched in that the values associated with the Berkshire brand translate into values that consumers look for: integrity, honesty, trust, value."